The reasons for the fall of Rajapaksa’s government should have sent alarm bells ringing in Pakistan’s power corridors. Shortage of foreign reserves created inability by the government to buy essential imports. In March 2022, imports on 367 items were imposed to save on the reserves. Besides fuel, those on list included fruits, milk products and fish dubbed as ‘non-essential items.’ Pakistan recently followed a similar imposition on what it dubbed ‘non-essential items’ to hold on too it’s small pot of foreign reserves. Destabilizing power cuts by Sri Lankan government, mostly due to low water levels at hydropower units, in a very dry weather has worsened an already bad situation. This taking away of electricity supply inevitably impacts production lines, causing lesser output, laying off of staff and less consumer buying power. Though some water reserves were withheld for irrigation to address the needs of new cropping season as well as domestic users, the shortfall resulting due to this was too high to cover the existing consumer needs. Sri Lankans faces around 12 hours of power cuts daily. Pakistan on the other hand is facing a shortfall exceeds 7,000MW with power cuts going up to 8 hours a day or more in some areas. Prime Minister Shahbaz Sharif says the graph of power cuts shall increase in July this year. The negative cascading effect being faced in Pakistan as the impact of the cut hit, is the same as faced by Sri Lanka. The electricity shortcuts have coupled with weekly increasing cost of fuel in Pakistan and like Sri Lanka, import orders by other nation has fallen as producers are faced with a fluid cost situation of ever-increasing electricity and fuel prices countered with a very limited capacity to absorb these cost increases. Inflation was never this high in Sri Lanka, it is at 17.5%, with prices of daily goods going through the roof. Reportedly, one kilogram of rice normally costing 80 rupees is now at 500 Sri Lankan rupees. And this is just one example. Trading Economic declares that the annual inflation rate in Pakistan jumped to 21.3 percent in June of 2022, from 13.8 percent in the previous month. It was the highest inflation rate since December of 2008. Also, in Pakistan, rice exports this financial year increased, however, cost per unit fell, therefore, earnings fell. These needs probe. At retail outlets, basmati rice is over Rs 300 per kilo bag, much, much more expensive a year ago. Using IMF as a lender, it is critical to inject money in local economy to boost local produce and move towards a healthy economy. This is a tough call with meeting IMF conditions. So, nations continue borrowing digging deep in a debt trap. What is needed in this situation is a host of smart strategies that both Sri Lanka and Pakistan lack. Interestingly, both countries opted for diverse taxation policies, resulting however, in the same outcome. Rajapaksa government cut back value added taxes from 15% to 8%, Other indirect taxes were done away with. Corporate taxes too were reduced. These steps wiped out government earnings. Pakistan’s fiscal budget 2022 targets an increase of 17% in taxation. However, increasing 63% indirect taxes and only 37% progressive taxes reflect upon the dearth of forward-thinking strategies. This has resulted in squeezing the domestic economy, lower production at higher costs, laying off staff, lower consumer buyer power, lower exports. Lesser jobs. More frustration. Like Pakistan [under Khan] Sri Lanka too sought help from other regional countries rather than going to IMF. Forced to seek its help, a lot of water had already flown from under the bridge.
Frustration. People broke in the office and house of the Sri Lankan President who fled. Paikiasothy Saravanamuttu, executive director of the Centre for Policy Alternatives, a Colombo-based think tank has offered an opinion that though elections are a necessary step, one year of IMF negotiated help is a need. Ranil Wickremesinghe, the Prime Minister appointed, is not a popular choice, maybe Sri Lanka will see more turmoil before moving forward.
In Pakistan, the appointment of Shahbaz Sharif coupled with his son as CM Punjab has not gone down with the people. Even those not supporting PTI agree that Shahid Khaqan Abbasi or someone of a similar stature may have been a better choice. However, are elections with same motley of people coming back the answer to Pakistan’s deeper malaise? The parallels between the two nations are frighteningly similar.
Frustration!
The writer is a lawyer, academic and political analyst. She has authored a book titled ‘A Comparative Analysis of Media & Media Laws in Pakistan.’ She can be contacted at: [email protected] and tweets at @yasmeen_9.